To eliminate an inflationary GDP gap, a government typically aims to reduce aggregate demand. This can be done through fiscal policy measures. The following options are fiscal tools that could be used for this purpose:
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Raise taxes - This can reduce disposable income and consumer spending, helping to decrease aggregate demand.
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A combination of both reduced government spending and higher taxes - This approach would also effectively lower aggregate demand.
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Decrease government spending - Reducing government expenditures decreases overall demand in the economy.
The other options, such as decreasing taxes and increasing government spending, would typically stimulate demand rather than reduce it, and thus would not be appropriate tools for eliminating an inflationary GDP gap.
So the correct selections are:
- Raise taxes
- A combination of both reduced government spending and higher taxes
- Decrease government spending